How a $1.6 Million Portfolio Generates $9,000 a Month While Dodging the Medicare 'IRMAA' Tax Cliff

It's possible to build a £1.27 million ($1.6 million) taxable portfolio that can generate £7,150 ($9,000) monthly income while keeping a 64-year-old couple's modified adjusted gross income below the IRMAA tier 1 threshold.

This strategy uses a four-sleeve investment mix, according to Drew Wood, a personal finance analyst. If done right, the strategy yields £85,800 ($108,000) annual income without triggering Medicare's surcharge adjustments, he said.

The IRMAA tier 1 threshold for joint-filing married couples is currently at £172,820 ($218,000) in MAGI, meaning any income above this amount triggers higher Medicare Part B and Part D premiums.

Cross this threshold by even one dollar and couples pay the full surcharge for the entire year, which can cost up to £910 ($1,148) annually for tier 1 in 2026.

A Four-Sleeved Approach to Beating the IRMAA 1 Threshold

Wood endorsed a portfolio that allocates funds across four distinct investment sleeves designed to balance income generation with tax efficiency. JEPI (JPMorgan Equity Premium Income ETF) is at the core, yielding covered call income while maintaining equity exposure.

The second sleeve consists of taxable bond investments that generate regular interest income without the double taxation of dividends. These bonds help stabilise the portfolio's overall return while contributing predictable cash flow to the monthly distribution.

The third sleeve involves tax-managed equity funds, selected for their low turnover and minimal capital gains distributions. These funds provide growth potential while avoiding the unwanted tax events that could push MAGI over the IRMAA threshold.

The fourth sleeve includes municipal bonds that generate tax-free income not counted toward MAGI calculations for IRMAA purposes. This tax-exempt component supplements spending, without the additional Medicare premium burden.

Prerequisites and Constraints to a Workable Strategy

Withdrawing exactly £85,800 ($108,000) annually keeps the couple's MAGI at approximately £172,025 ($217,000), staying safely below the £172,820 ($218,000) tier 1 threshold. Wood said couples must track the investment sleeves throughout the tax year to avoid accidental threshold breaches.

For those intending to test out Wood's portfolio strategy, he said it's important to lay the groundwork first, to test the water first before going all-in. It's safer to place covered-call and preferred sleeves like JEPI and PFF inside an IRA when possible, he said, since their distributions are largely ordinary income and sheltering them directly lowers MAGI.

He also advised modelling the two-year IRMAA lookback, because 2026 premiums are set off 2024 returns. Any Roth conversion or capital gains harvest done this year flows through to 2028 premiums rather than affecting current-year costs.

He also suggested stress-testing JEPI distribution at 6 per cent yield, since covered-call payouts drop once volatility relaxes.

Caveats to Wood's Four-Sleeved Strategy

This strategy carries significant risks, however, because it requires maintaining precise income levels below the IRMAA threshold, while also depending entirely on a four-sleeve portfolio's ability to consistently generate £7,150 ($9,000) monthly.

Market downturns can derail this by forcing unwanted capital gains sales or reducing dividend distributions.

The approach also assumes stable market conditions over many years, ignores inflation's erosion of purchasing power, and requires constant active monitoring and adjustment.

It also locks couples into a rigid withdrawal discipline that eliminates flexibility for emergencies or opportunities, which could backfire if any single sleeve underperforms, or if IRS rules regarding MAGI calculations and IRMAA thresholds change without warning.